Here’s simple question for Western economists to consider. Aside from Israel, how many other countries have continuously reported 4% economic growth since 2003, including this current year? Apart from China, not too many.

Israel’s economy is similar in size to Greece, Portugal and Ireland, although it shares few of the problems of these territories. These countries ran up large debts. Bankers were prepared to allow the red numbers to grow for too long. And the politicians have dithered in coming up with a solution.

So when former finance minister and now Prime Minister, Binyamin Netanyahu, says: “”We must continue this responsible management. This means that we will need to reject with an iron fist populist draft legislation – both from the coalition and from the opposition,” it should be time for others overseas to listen in on Israel’s plan.

For all of Israel’s economic and high tech successes, the country will not be immune from any slowdown in Europe. So, it is hardly surprising that this week, the Bank of Israel is expected to announce a drop in the central rate of interest. And reports in the Hebrew press suggest of work in progress for an emergency budget, which will contain some severe cuts – if the looming recession was to demand it.

Just how serious is the Prime Minister? Can his Finance Minister deliver? What will be the position of the Bank of Israel?

It is easiest to start with the latter. The Governor of the central bank, Stanley Fischer, is an internationally renowned central banker. Over the past few years, he has taken on vested interest groups, local banks, government ministers and his own workers’ union, and usually won convincingly. Local and oversees observers are sure that he will look after his end of things.

The finance minister, Dr Steinitz, has deservedly built up an excellent reputation over the past three years. However, you begin to wonder just how much he has the full support of his boss. Oops – room for some worry here.

As for Netanyahu himself, he knows how to talk the talk, but…..If he were to give in on the wage demands of hospital doctors, it would make him very popular. However, that decision would kick in a chain of other public sector pay claims. The defence budget is almost certain to require a heavy upheaval, as threats surface on the borders of Syria and Egypt. And, as usual, the government is a coalition, compromised of many small squabbling factions; bad news for strong government.  

 hw will all these factors effect Netanyahu’s looming election planning? Personally, I have never seen him as a man who stands up to pressure.

There is much to praise about the Israeli economy. Shaul Rosenfeld’s recent blog makes for an excellent summary. What is not clear to me is what is the biggest threat to the recent economic achievements in the Holy Land – poor European financial leadership or a local team that will lack fight and direction at a critical moment?